One practical use case for blockchain is turning assets and ownership into something digital. A work of art, a piece of real estate, or a batch of loyalty points can all be represented as tokens on a blockchain. Those tokens can be easier to send, split, and track than the actual physical item—without changing what they stand for in the real world.
What is tokenization?
Tokenization means creating a blockchain token that stands in for a real-world asset (RWA)—something that exists or has value outside the blockchain, like cash, real estate, art, or commodities. RWAs can include physical items (a gold bar, a property title) or financial instruments (a bond, an equity share, or an invoice).
The token acts like your numbered claim ticket, and the blockchain is the shared, time-stamped log that records which wallet holds that ticket—and every transfer of it. Instead of passing around the physical item or paper contract, people can trade, split, or verify ownership digitally while the real asset remains securely held or managed off-chain.
One emerging application is banks issuing tokenized deposits—digital representations of bank deposits held with FDIC insurance and governed by KYC/AML rules—so transfers can be faster and on-chain while still under regulated protections.
There are two common types of tokens:
Fungible tokens: These tokens are interchangeable 1-for-1 units (like dollars). For example, any 1 USDC—short for USD Coin, a popular stablecoin pegged to the U.S. dollar—equals any other 1 USDC. They’re helpful for stablecoins, loyalty points, or revenue shares.
Non-fungible tokens (NFTs): These tokens are unique and non-interchangeable, meaning each one represents a distinct item, like a one-of-a-kind digital artwork. NFTs are commonly used for unique digital items such as artwork, collectibles, membership passes, or in-game items. Most NFTs are purely digital and are not real-world assets (RWAs). Simply put, NFTs are unique digital assets, while RWAs are digital representations of ownership of something tangible in the real world.
How it works
Putting an asset on-chain generally follows these steps:
Identify the asset & the rights. A company (the issuer) decides what’s being tokenized and how holders’ rights are defined (terms, disclosures, redemption rules).
Set up custody & controls. The real-world asset is kept safe with a trusted third party—like a bank, transfer agent, or records system—that tracks who owns it. This custodian (together with the issuer) backs the tokenized asset, ensuring that every digital token corresponds to a real, verifiable off-chain asset.
Mint the tokens. Smart contracts create a fixed supply and encode rules (who can hold, how transfers work, how redemptions happen).
List & transfer. Tokens move between wallets on a blockchain. This record-keeping system or ledger provides a shared, time-stamped history.
Redeem or settle. When a holder wants to sell, the issuer or custodian follows the terms—paying cash proceeds, swapping for another asset, or dissolving the token.
The benefits
There are many benefits to tokenization, including:
Fractional ownership. You can split the ownership of a high-priced asset (think: a building, a fund, a piece of art) into affordable portions, so more people can own a bit of it.
Transparency. Every transfer lives on a public ledger, and that helps with provenance (proving ownership), audits, and faster checks.
Faster transfers, fewer intermediaries. Moving a token often takes minutes, not days, with clear settlement and programmable rules, like who can hold it.
Programmability. Payouts, vesting, and access rights can be encoded into the smart contract, reducing paperwork and manual steps.
These benefits are already playing out across industries, take a look below at real-world use cases.
Real-world use cases
Tokenization already powers many valuable tools. In each case, the token is your digital claim, while the underlying asset remains with a regulated custodian or a trusted records system.
Treasuries and funds: Some companies turn shares of short-term government bond funds (cash-like funds that earn a little interest) into tokens so that you can buy or sell on a blockchain in minutes while the real bonds and cash stay with a regulated bank or trust company.
Real estate slices: Properties are organized into legal entities and then represented by on-chain tokens you buy from a crypto wallet; you hold a digital claim to your share, and rent or sale proceeds for the property are paid out per the terms recorded in the smart contract.
Loyalty & brand programs: Points and passes become tokens, which makes them easier to issue, verify, and redeem. Perks can be IRL (in-store discounts, event access) or digital (gated content, online discounts), and activate the moment your wallet holds the token.
Ticketing & passes: Event tickets as NFTs reduce counterfeiting and enable instant resale, with rules or perks (like merch drops) for verified holders.
Supply chain records: Certificates (origin, compliance, sustainability) serve as on-chain proofs that accompany goods from source to shelf, creating a shared audit trail.
Banks, asset managers, retailers, and fintechs are rolling out real tokenization products—not just pilots—bringing clearer audit trails, faster settlement, and 24/7 service.
What to evaluate before buying
If you decide to explore a tokenized product, treat it like any financial product and review the basics first:
Issuer & disclosures: Who’s behind the token, and what rights do holders actually have regarding income, redemption, and access? Make sure you read the terms.
Custody & redemption: Where is the underlying asset held, how do you redeem it, and what are the timelines/fees?
Eligibility & rules: Some offerings are limited (for example, to accredited investors or certain states), and transfers may be restricted by design.
Costs & networks: Check gas/transaction fees, as well as platform fees; they vary by blockchain and provider.
Considerations to keep in mind
Whenever you’re thinking about buying a tokenized asset, remember the potential risks:
Counterparty & legal: You rely on the issuer/custodian and the legal terms that tie the token to the tangible asset. If the issuer fails, changes terms, or the custodian has any issues, you may face delays or be unable to redeem.
Price & liquidity: Liquidity means how easily you can sell at a fair price. In a quiet market, you may need to accept a discount, and the token’s price can move even if the underlying asset is steady.
Operational: Tokens run on software and wallets. Bugs, smart-contract mistakes, key mishandling, or bad oracle (off-chain data) inputs can lead to losses or stuck transactions.
Regulatory: Rules vary by asset and location and can change over time. New guidance may limit who can buy, where trading can take place, and how and when you can redeem.
Key Takeaways
Tokenization does not change what an asset is. It changes how it is owned and exchanged. By giving real-world value a digital wrapper, it can make records harder to tamper with, transfers faster and simpler, and access more flexible for investors. If you explore it, start small, read the terms, and make sure the issuer, custody, and redemption path are crystal clear.